Indian Economy News & Discussion - Aug 26 2015

[Suraj]

The previously linked data shows that both the claims of private consumer spending and investment cycle not rising, are in fact, wrong. All figures in % of GDP, respectively private final consumption expenditure, government final consumption expenditure and gross fixed capital formation. Data proves PFCE and GFCF has risen while GFCE has remained stable:

Code: Select all

Activity  1Q15  2Q15  3Q15  1Q16  2Q16  3Q16
PFCE      58.3  57.9  57.9  60.1  59.6  59.5
GFCE      12.1  13.2  10.3  11.6  13.3  10.2
GFCF      32.2  31.1  29.9  30.9  30.5  27.8

PFCE in particular is up significantly. PFCE was 57% for two fiscal years 2012-13 and 2013-14. It slowly inched up to ~58% in 2014-15 and now is close to 60%, for an increase corresponding to 3% of GDP.

GFCF was 30.4% in 2012-13, and fell to 28.5% in 2013-14 . It rose again to >30% in 2014-15 and continues to stay above 30% in the current fiscal year, whose GFCF figures will likely be revised upward just as 2014-15 numbers were.

Neither the claim that private consumption hasn't grown, nor that the investment cycle hasn't taken off, is true.

[KrishnaK]

So yes all government can do is prepare for the 'oil shock'., but the equation has changed. Oil shock may even be a shock of the past. Excessive production capacity and innovations in battery means newer tech like electric cars and scooters can be put on the market sooner.

One initiative Modi Sarkaar can take and it will make it popular is take out the auto rickshaws and replace them with Electric ones. With free charging of batteries & replaceable batteries at select auto locations. And see the drop in petrol/kerosene consumption.

This seems more along the rural india buying unheard of soap brands fantasy. The Modi Sarkar has 2.5 years left before it goes to the polls and a credibility problem with its numbers and economic performance so far. Electric rickshaws is your answer ?

[Suraj]

KrishnaK, this is the economics thread . Please continue your political argument in the politics thread .

[vina]

PSU banks are in the Kakkoose. Gross NPA close to 10% for a lot of them. They might as well start handing out cash and stop pretending to be a business. Saves everyone a lot of trouble.

[Yagnasri]

PSU banks are in the Kakkoose. Gross NPA close to 10% for a lot of them. They might as well start handing out cash and stop pretending to be a business. Saves everyone a lot of trouble.

The NPAs are mainly due to large corporate loans given under pressure from "you know whom". Further even so called professional private players like ICICI are in larger trouble. They are hiding it for now.

[Austin]

$100 Billion Hole Leaves India's Banks Struggling: Your 10-Point Cheat-Sheet

Punjab National Bank's December quarter result has put the spotlight back on the problem of bad loans that has dogged India's banking sector for the last three years. The country's banking system is struggling under $100 billion (over Rs. 6.5 lakh crore) of stressed loans (including restructured loans), hurting economic growth, analysts say.

Here is your 10-point cheat- sheet to the bad loan issue:

1) Punjab National Bank, India's fourth-biggest state-run lender by assets, posted a 93 per cent fall in profit in Q3 as its provisions for bad loans doubled to Rs. 3,776 crore. Central Bank, the eighth-biggest state-run lender, smaller lenders Allahabad Bank and Dena Bank all reported net losses in the December quarter due to surge in bad loans. (Read)

2) State-run banks, which account for over 70 per cent of all outstanding bank loans, have borne the brunt of burgeoning bad loans. But private lenders have not been immune too. ICICI Bank - India's biggest private lender by assets - tripled its provisions for loan losses in Q3 after bad loans widened to 4.72 per cent of total advances.

3) Both Punjab National Bank and ICICI Bank expect the asset quality issues to hit profitability in the current March quarter too. "The surgery is not over," PNB Chief Executive Usha Ananthasubramanian said. "The next quarter as well ... I should say the clean-up process is underway," she said of the three months to March.

4) Indian banks have been struggling with asset quality issues for many quarters now, but the recent spike in bad loans has been attributed to the Reserve Bank's order asking lenders to treat some stressed borrowers as non-performing even if they have not defaulted yet.

5) The RBI's directions followed Governor Raghuram Rajan's call for cleanup of bank balance sheets by March 2017. The banks have been asked to make required provisions during the third and fourth quarters of this fiscal year ending in March.

6) Over the last three years (FY 2012-15), a whopping Rs. 1.14 lakh-crore of bad loans have been written off by 27 public sector banks. A lot of loans that have been written off originated in 2009-12, when economic growth came under severe stress due to the global financial crisis. (Read)

7) A large part of the loans being written off currently are from the steel and power sectors. Steelmakers are facing sharp price declines and increased competition from higher imports from China, while non-performing loans in the power sector are on account of higher exposure to state distribution companies.

The government last year announced a revamp plan, 'Indradhanush', to infuse Rs. 70,000 crore in state-owned banks over four years, while they will have to raise a further Rs. 1.1 lakh crore from the markets to meet their capital requirements in line with global risk norms Basel III.

9) The upcoming budget must tackle the problem of bad loans, analysts say. "The most important reason why banks are reluctant to lend is because of their non-performing assets, so the issue of NPAs will have to be settled," said former Finance Minister Yashwant Sinha. (Watch)

10) Rising bad loans and falling profitability have hit market capitalization of state-run banks. The PSU Bank index of National Stock Exchange, that comprises top state-run lenders, has plunged 42 per cent in last one year as compared to 15 per cent fall in the Nifty index.

[vina]

1) Punjab National Bank, India's fourth-biggest state-run lender by assets, posted a 93 per cent fall in profit in Q3 as its provisions for bad loans doubled to Rs. 3,776 crore. Central Bank, the eighth-biggest state-run lender, smaller lenders Allahabad Bank and Dena Bank all reported net losses in the December quarter due to surge in bad loans. (Read)

I think PNB's NPAs are more than TWICE it's net worth! Same situation with a whole lot of other banks. The banks are trading at somewhere between a quarter (0.25) to 0.75 times their book values (0.75 is for the "Herculean" SBI) .

Sorry folks. The banking system has been run into the ground by this "Directed" lending nonsense and this "social" whatever nonsense. Time to start running them as real enterprises and not the piggy bank of the politicos to dole out loans and favours to their minions and folks in their patronage networks.

Investments in steel are probably a write off. Power sector can be salvaged in the long term if the discoms are privatised and the states are prevented from running the discoms to the power in their free power/dole /patronage network business by putting the burden on the discom's books and away from their budgets.

In any case, it is going to be a long haul , no quick turn around. And as Jayant Sinha admitted on TV yesterday, the govt has very very little fiscal room (given the huge sub par nominal GDP performance) the committments to the pay commission and OROP. So there you are, like I said, very little levers left to pull and simply boxed in.

[Suraj]

Tax collections stand at Rs 10.66 lakh cr in first 11 months of fiscal

The finance ministry said today that tax collections stood at Rs 10.66 lakh crore in the first eleven months of the current financial year, which was 73.5% of the Budget target of Rs 14.49 lakh crore. However, direct tax collections might slightly fall short of the budget target, but it would be offset by robust indirect tax collections, it said.

The revenue department expects additional about Rs 40,000 crore to come from indirect taxes, which will offset shortfall in direct tax mop up.

In its first upload on YouTube by the finance ministry, revenue secretary Hasmukh Adhia said that direct tax collections were up 10.9% at Rs 5.2 lakh crore till January of the current financial year, while indirect tax mop up grew 33% at Rs 5.44 lakh crore.

Facts dispute claims by banks: write-off gallops, recovery crawls

If the recovery rate for SBI was 19.06 per cent in 2012-13, it dropped to 11.71 per cent the next year and declined further to 10.88 per cent in 2014-15, data disclosed in the bank’s annual report reveals. In absolute terms, SBI’s write-offs jumped almost four times from Rs 5,594 crore in 2012-13 to Rs 21,313 crore in 2014-15. It recovered Rs 2,318 crore last year compared with Rs 1,066 crore in 2012-13.

The trend is similar for ICICI Bank with its loan recovery rate dropping from 26.74 per cent to 15.96 per cent during the same period. It, however, fares better than SBI in keeping its write-off low. ICICI Bank’s write-off stood at Rs 832 crore in 2014-15, only marginally higher than Rs 725 crore in 2012-13, according to its annual report. Its recovery, however, declined to Rs 132.8 crore compared with Rs 193.9 crore during the period.

“Write-offs were initially introduced as a tool for banks to manage their tax liabilities on impaired assets. Under the norm, banks were expected to treat the write-offs as advances and pursue their recovery. However, most banks have very poor recovery follow-up once the loan is written off,” K C Chakrabarty, former RBI deputy governor told The Indian Express. A presentation by him in November 2013 when he was DG, RBI, showed that less then 10 per cent of the total amount written off (including technical write-offs) have been recovered for the period FY01 to FY13. There is no data on recovery of assets written off in the last two financial years.

In contrast to the tardy recovery, the write-offs and bad loans have only mounted and are likely to rise further in 2015-16. After writing off Rs 53,100 crore in the 2014-15, banks are expected to write off another Rs 52,227 crore this year, says data available from India Ratings which has studied the balance sheets of banks and corporate houses. Loan write-offs in the first half of 2015-16 were Rs 25,000 crore. With this, banks would have written off Rs 277,400 crore in the last ten years with more than half the write-offs happening in the last three years.

Gross non-performing assets, or bad loans, are expected to jump 31.48 per cent in the fiscal ending March 2016 to Rs 426,400 crore from Rs 324,300 crore. On top of this, banks are expected to show restructured loans worth Rs 615,000 crore for the year ending March 2016. This includes standard restructuring loan of Rs 502,000 crore and NPA restructuring of Rs 113,100 crore, says Ind-Ra data which did the number crunching for The Indian Express.

This means that the total stressed assets (NPAs and standard restructured loans) are expected to cross Rs 9,28,000 crore mark by FY16. “Many of the restructured loans of corporates are now turning into non-performing assets,” said Udit Kariwala, Analyst -Financial Institutions, India Ratings.

In fiscal 2007, total restructured loan was just Rs 10,400 crore, This has now shot up by 5,813 per cent to Rs 615,000 crore as corporate houses went on a borrowing spree in the last seven years. Many such corporates which embarked on infrastructure projects which need massive investment are now unable to pay up, forcing them to go for corporate debt restructuring (CDR), 5:25 refinance scheme and strategic debt restructuring scheme to remain out of the NPA books.

Ind-Ra estimates around one-third of the corporate sector borrowing from banks to be deeply stressed currently (totalling to 21 per cent of bank credit) of which about half has been recognised currently as impaired in the books (NPAs and restructured loans).

The writeoffs of bad debt are a necessary action by the banks. Over the past decade, their bad loans have grown dramatically, with the point of unsustainability reached sometime 2-3 years ago, when writeoffs started accelerating. For years, banks have lent out and then tried to kick the can down the road by restructuring loans. Better to do the writeoffs now, combined with restructuring debt into bad bank, and the upcoming bankruptcy code in the budget.

[vina]

The "pillar" of the Govt /mai -baap banking system SBI , the ultimate sarkari organisation, reported fresh slippages of Rs 20,000 crore, with another similar or higher amount expected next quarter as well.

And the credit default swaps of SBI has widened ! The real truth of the state of the loan books of the public sector banks is finally coming out thanks to the RBI cracking down and the govt can no longer brush the problem under the rug and leave it unaddressed.

Banking sector reorg is vital right now. Create a bad bank, merge the smaller banks (the Commie Union who will be out in the streets in protest , kick those folks out and send them home) , capitalise them, and reorg the entire sector. Set up fast track and special tribunals in the back of the upcoming bankruptcy law in the budget and get cracking on the NPA recovery.

All hands on deck folks. This is serious. Droning out random anodynes on "growth rate " and this and that aint gonna cut it.

[Vipul]

^^ HDFC Bank more valuable than Deutsche Bank, Credit Suisse.

The carnage in European financial stocks has rejigged the pecking order of banks in terms of market capitalisation. HDFC Bank, India's second-largest private lender by assets and the second most expensive bank globally, has overtaken European majors such as Deutsche Bank, Credit Suisse, SocGen in market cap. Kotak Mahindra Bank, with assets at just 1% of the Deutsche Bank, has emerged as one of most expensive banking stocks globally.

The gap between the market caps of the two banks is down to $1 billion from $24 billion a year ago. Two years ago, HDFC Bank's market cap was half that of Deutsche's. Today, it's almost double. Amid fears of corporate defaults and global slump, the health of assets have assumed a far greater importance over asset base in determining valuations.

In the local market, banks with relatively safe retail franchises — such HDFC Bank, Kotak Mahindra and even IndusInd — are fetching higher valuations. HDFC Bank is trading at 4.07 times its tangible book value, while Deutsche Bank, Credit Suisse, and SocGen are trading between 0.35 and 0.64 times their respective book values.

[Austin]

1,665 Points in Four Days: Three Reasons Why Sensex Crashed

http://profit.ndtv.com/news/budget/arti ... e-bigstory

[Suraj]

RBI has been extremely late and more than a little incompetent in the whole matter. They are the central bank. It's their job to keep banks in line. Most of the recent increase in NPAs aren't fresh loans going bad, but the base of repeatedly restructured loans being finally recognized as NPAs. A significant part of this bad loan base grew between 2008-09 an 2012-13 fiscals, with the first efforts to manage it since 2013-14 fiscal.

With the banking system in such poor shape, it's a significant accomplishment that both PFCE and GFCF numbers are up 3-4 percentage points of GDP in the last 1-2 years. Both the cost of capital and availability ought to have crimped private final consumption and fixed capital formation, but both are doing well despite the banking sector.

[Dipanker]

Clean-up act on: RBI chief Rajan says will fix bad loans

IMO assets of the big defaulters should be confiscated to make at least partially recovery. One such big defaulter is Vijay Mallya.

[Suraj]

Rajan Chides Scare-Mongers on Bad Debt as India Banks Clean Up

Dismissing “wild claims” made by some analysts about soured debt in India, central bank Governor Raghuram Rajan assured investors that a clean-up of books underway will help restore lenders’ health and soon position them to revive economic growth.

Projections made by the Reserve Bank of India show any breach of minimum core capital requirements by a few state-owned banks will be small in the absence of recapitalization, he told delegates at a bankers’ conference in Mumbai on Thursday. The RBI and Prime Minister Narendra Modi will do what it takes to nurse them back, he said.

Rajan has set a March 2017 deadline for lenders to clean up their balance sheets by increasing provisioning as the proportion of stressed assets, including restructured and soured loans, to total advances surged to a 14-year high of 11.3 percent end-September. As a result, profit at State Bank of India, the nation’s biggest by assets, slumped 62 percent in the quarter through December, while net income growth at ICICI Bank Ltd., the No. 2, cooled to a six-year low.

Rising bad debts and inadequate risk buffers at India’s state-run banks have been hindering Modi’s attempts to revive lending growth in the $2 trillion economy. Junior Finance Minister Jayant Sinha told reporters in New Delhi on Thursday that the stock of stressed assets is roughly 8 trillion rupees ($117 billion), and the government has committed cash for this.

“It’s good news that we have scoped the problem,” Sinha said. “We are moving swiftly and decisively to deal with the problem.”

State-owned banks account for more than 70 percent of India’s outstanding loans. Government-controlled lenders will require infusions of 1.8 trillion rupees in equity to comply with international standards under the so-called Basel III regulatory regime, Finance Minister Arun Jaitley said in August.

Bad loan provisions at SBI in the quarter through December almost doubled to to 76.4 billion rupees from the previous quarter while that at its biggest private sector rival ICICI Bank tripled from a year-ago period, as the lenders tried to meet RBI’s deadline, exchange filings showed.

“If the losses do not materialize, the bank can write back provisioning to profits,” Rajan said Thursday. “If the losses do materialize, the bank does not have to suddenly declare a big loss, it can set the losses against the prudential provisions it has made.”

Wild claims made by some financial analysts about the size of problem verge on “scare-mongering” he said. “The market turmoil will pass. The clean-up will get done and Indian banks will be restored to health.”

[Prem]

UAE-India trade may hit $100bn in 2020
http://www.emirates247.com/news/emirate ... 1-1.620596

India is considered to be the UAE’s primary trade partner, accounting for about 9.8% of its total non-oil trade. India is also the largest importer of goods from the UAE, buying about 14.9% of that country’s exports and about 8.7% of its re-exports, becoming the second-largest market of the UAE in the latter category.India ranks third among countries that export to the UAE, accounting for about 9.2% of the total imports by the UAE. The total volume of foreign trade between the two countries amounted to $60 billion in 2014, making the UAE India’s primary trade partner in the Middle East and North Africa. Economic sources expect the value of trade exchanges between the UAE and India to hit $100 billion in 2020.In its report, the Ministry of Economy also stated that the Framework Agreement on Economic Co-operation between the Republic of India and the Gulf Co-operation Council that took place in August 2005, aimed at exploring the possibilities of establishing a free trade area between the two parties, was a quantum leap in trade exchanges between the two parties. GCC countries are important trade partners of India and account for more than 11% of India's global exports, a figure that continues to grow. This agreement may also be the key to more comprehensive co-operation between the two parties in various fields.The report said that India is the seventh largest economy in the world with a total GDP (at current prices) worth about $2,182.577 billion in 2015, according to World Bank statistics, achieving growth of up to 6.4% from 2014.
Statistics issued by the World Trade Organisation in its 2015 World Trade report indicated that India ranked 19th in the world in terms of exports, worth $317 billion, and accounting for 1.7% of the global exports. It also ranked 12th in the world with imports worth $460 billion, accounting for 2.4% of the world’s imports.
Based on the data in the World Investment Report issued by UNCTAD, the Ministry’s report said that India ranked 10th in the world in terms of attracting foreign direct investment, placing it among the top nations of the world in this category. This is due to several reasons, such as the fact that India is one of the largest economies in the world, its strategic position, its rapidly growing consumer market, and its large skilled and trained labour force that is cost competitive, as well as its industrial sector that is one of the largest in the world, covering all industrial activities and fields, large manpower of scientists, engineers and technicians, besides rich agricultural and mineral resources.The report also focused on the availability of large areas of arable land in India, as it is the seventh largest country in the world in terms of area. India is considered to be one of the largest food producers, among the largest sugarcane and tea producers and the second-largest producer of rice, fruits and vegetables.The report also indicated that the Indian automobile industry has begun to sweep the world markets, where India has become the second-largest manufacturer of tyres, the fifth-largest manufacturer of commercial vehicles and the fourth-largest passenger car market in Asia. It is also the largest producer of tractors in the world.Tourist services are among the largest service industries in terms of total revenue and foreign exchange earnings. The wired and wireless telecommunication sector in India is the third-largest in the world and the second-largest among the emerging economies in Asia. It continues to grow at an unprecedented pace, and is considered one of the main sectors responsible for economic growth in India.India is one of the important and influential countries in terms of world trade volume, as it ranked 12th in imports and 19th in exports in 2014, according to International Trade Centre statistics.The value of India’s exports amounted to nearly $310.34 billion in the 2014-2015 period, compared with $314.41 billion in the 2013-2014 period, registering a 1.29% drop in value. Forty-three per cent of its exports were concentrated in 10 commodities in the 2014-2015 period.In the 2014-2015 period, India's imports decreased by 0.48%, amounting to $448.03 billion, compared to $450.2 billion in the 2013-2014 period. Fifty-four per cent of its imports were concentrated in ten commodities. The most imported commodities were petroleum oil and raw bituminous mineral substances, worth $116.44 billion and accounting for 26% of the total imports, an 18.9% drop from the 2013-2014 period. Gold, in raw, semi-fabricated or powder form, came in second place, with a total value of $34.4 billion in imports, accounting for about 7.7% of the total imports, a 20% rise from the 2013-2014 period.
The report addressed the economic relations between India and the UAE, stressing that the UAE economy attracts investment due to many reasons, such as the economic and political stability in the country, its status as the gateway to regional and international markets, the abundant investment opportunities it offers, as well as its excellent geographical location, readily available infrastructure and ease of investment procedures in various sectors.India ranked second in terms of the cumulative value of foreign direct investment in the UAE, with US$5.7 billion being invested in 2013, a 20.4% rise from 2012.The report also included data of the UAE’s investments abroad that were surveyed by the Ministry of Economy. It confirmed that the UAE is the largest investor in India from the Arab world, accounting for 81.2% of the total Arab investments in India. The UAE also ranked 11th in the world in terms of foreign direct investment in India. The total sum of the UAE’s investments in India is estimated to be about $8 billion, including $2.89 billion as foreign direct investment.

Council was inaugurated by UAE Foreign Minister, H.H. Sheikh Abdullah bin Zayed Al-Nahyan.The report also addressed direct foreign non-oil trade between the UAE and India. It said there was a 21% decrease in the total value of bilateral trade in 2014, compared with 2013, as a result of a 33% decline in the UAE’s re-export traffic, dropping from $8.6 billion in 2013 to $5.8 billion in 2014.National exports also fell by 31% during the same period, while the country's imports from India decreased by 12%. This decline has affected the value of trade balance, where the deficit has increased from $3.45 billion in 2013 to $6.29 billion in 2014.Free zone re-exports also dropped by 28% during the same period, while free zone imports from India dropped by 3.5%. This decline has affected the trade balance, with the deficit increasing from $1.9 billion in 2013 to $2.8 billion in 2014.India is considered the UAE’s third-largest trade partner in terms of imports, worth about $17.4 billion in 2014, a 12.4% drop from 2013.The report addressed a number of indicators specific to the Indian economy. The value of foreign direct investments in India reached about $34.4 billion in 2014, a 22.1% rise from $28.2 billion in 2013. In contrast, Indian investment overseas rose from $1.68 billion in 2013 to touch nearly $9.8 billion in 2014, an 87% rise.

[vina]

IMO assets of the big defaulters should be confiscated to make at least partially recovery. One such big defaulter is Vijay Mallya.

The BIGGER defaulter by FAR is Air India and the govt insists on throwing tax payers money continually into that bottomless pit. Liquidate Air India. Sell off /Liquidate BSNL & MTNL.

How about HMT, How about HPF ? What earthly purpose does a large factory in Ooty that is supposed to make photo films in the age of digital supposed to do ? Even Kodak went bust. Who will wear mechanical watches these days ? What will HMT do ? Who will buy it's light bulbs and tractors in the days of global players like Mahindra and John Deere and a very competent TAFE here ?

Collectively the public sector as a whole is a massive loss. The only thing that keeps it above water is the monopolised oil sector and it's administered prices. How about slashing all that in one stroke . It doesn't need any "parliamentary" approval. Cant blame Ra Ga and Congress for obstructing that can you ? Arun Shourie did a lot of stuff during Vajpayee's years. IF not today Maruti would be a sick enterprise (the Marans (senior one) later tried meddling with it anyways).

How about consolidating all those small changu mangu unviable PSU banks ? What is stopping you ? They are all owned by the Govt. Again, nothing to stop you. That will be a money bill. Rajya Sabha can't stop it .

[vina]

RBI has been extremely late and more than a little incompetent in the whole matter. They are the central bank. It's their job to keep banks in line. Most of the recent increase in NPAs aren't fresh loans going bad, but the base of repeatedly restructured loans being finally recognized as NPAs. A significant part of this bad loan base grew between 2008-09 an 2012-13 fiscals, with the first efforts to manage it since 2013-14 fiscal. .

That IS the nature of the political economy and system in India. RBI is not FULLY independent and the Banks are OWNED by the Govt and have an implicit sovereign guarantee.

Now what it does it , it allows the banks to be plundered on whim by politicos, starting from Indira Gandhi days, the infamous, Janardan Poojary loan melas, the horrendous loan write off by VP Singh's govt spearheaded by Devi Lal at one of the worst times in India's history (inflation went up to close to 18% after that, no wonder) , and every subsequent "farm loan waiver" .

And no it is not just "farm loans" alone, consider the case of India Bank and it's earlier head Gopalakrishnan . His photo used to grace every "opening " ceremony as like a politico . Now roll forward two years and Indian Bank declared a massive loss due to that Gopalakrishnan fiasco.

Make the banks commercial enterprises, independent of the Govt and this abuse will stop. Again, can be done in the stroke of a pen. Doesn't need RS approval.

[Suraj]

That is a politically motivated copout. RBI's push to properly reclassify restructured loans as NPAs and to write off bad loans, comes within the past year. But RBI did not become more independent in the last year. In fact, they arguably because much less independent because of the new interest rate creation panel comprising 3 members of RBI and 4 members from FinMin. And yet, despite that, the most significant effort to bell the 'restructured loans' cat comes in the recent past, as NPAs are fully exposed rather than the can being conveniently kicked down the road.

RBI's time to manage this was in the 2008-11 timeframe, supposedly under a much more independent polity uniike the current one whom you yourself argue is lessening the RBI's autonomy due to its efforts to push for the joint interest rate management committee.

The RBI works within the scope of its available powers. It was in a position to do more, but did not do so. The proof of that is the very fact that it is doing something right now. Something it could have done before, but did not. Either:
* RBI was less independent before than they are now - because they could do things now that they did not do before, or
* RBI was incompetent, with its head busy giving soundbites, only waking up now and issuing 'everyone calm down' claims like his interview posted above
Which one is it ?

I think the notion that making banks private will solve problems is laughably naïve. In the west, the governments don't control the banks. The banks control the government. It's much better the other way around.

[vera_k]

RBI has always been slow, nothing new in it. It will take action only if it or SBI is under pressure.

[vina]

RBI's push to properly reclassify restructured loans as NPAs and to write off bad loans, comes within the past year. But RBI did not become more independent in the last year.

The reason is now the RBI is headed by a persons with a brain AND a spine . Earlier they were supine! .

Trouble is , it is personality dependent. Time for a fully independent RBI to give credibility and teeth and hand monetary policy over to it (even if under a committee structure) and keep the grubby hands of the Politicos and assorted Baboons away from it.

As for banking regulation, that will become effective only when the Banks too are removed from govt control and the politics and baboons can't put their fists in the the cookie jar. The banks NEED to become independent.

All it will take is just a stoke of a pen. Do it, whats stopping you ? Not RS surely. It will be a finance bill.

[vina]

Is that company called "Hindustan Teleprinters Ltd" that used to occupy some pretty decent real estate in Chennai still in existence. If yes, can someone tell me what in the year 2016 , with the iPads and smartphones and everything is that device called "teleprinter" used for ?

As a kid I remember seeing them in a musty corner in PSU banks, and was touted as a "Technological Marvel" , you type in one end and it automatically types on the other end thousands of kilometres away.

[member_27845]

IMO assets of the big defaulters should be confiscated to make at least partially recovery. One such big defaulter is Vijay Mallya.

The BIGGER defaulter by FAR is Air India and the govt insists on throwing tax payers money continually into that bottomless pit. Liquidate Air India. Sell off /Liquidate BSNL & MTNL.

How about HMT, How about HPF ? What earthly purpose does a large factory in Ooty that is supposed to make photo films in the age of digital supposed to do ? Even Kodak went bust.

------------------------------------------------------------------------------------------------------------------------------

Re : HPF - this is from their website , seem to have diversified into medical imaging and diagnostic products

http://www.hpf-india.com/

Hindustan Photo Films Manufacturing Company Limited (HPF) manufactures and markets its fleet of products under the brand name "INDU", which in Sanskrit means Silver.

The mainline products of HPF are the medical diagnostic films viz. Medical X-ray, Medical Imaging Film, Mammographic film, scanner film etc.

HPF also manufactures Industrial X-ray films, Graphic Arts films for the printing sector, Bromide Paper and Roll films for the Photographic sector, Aerial Film for the Defense sector and Inkjet papers for the Digital Market.

The above products are manufactured with indigenous technology development and integrated manufacturing process.

[Suraj]

RBI's push to properly reclassify restructured loans as NPAs and to write off bad loans, comes within the past year. But RBI did not become more independent in the last year.

The reason is now the RBI is headed by a persons with a brain AND a spine . Earlier they were supine!

I disagree. The current RBI governor has been in his role since Sept 2013. The current government has been in place June 2014. The RBI head has therefore been in his role for 9 months before the current administration, during which period there was no significant action on this matter. The action to aggressively reclassify the repeatedly restructured loans as NPAs, is just over a year old. The timelines suggest the government pushed the RBI to act, as opposed to the RBI acting on its own. Since the argument is that the RBI anyway lacks independence and faces government pressure, this is also the more logical proposition.

As for banking regulation, that will become effective only when the Banks too are removed from govt control and the politics and baboons can't put their fists in the the cookie jar. The banks NEED to become independent.

There's nothing to prove that notional independence of banks from government ownership generates greater benefit. The US, UK and several others have banks that are entirely private entities. The Chinese have the big four banks that are government run. Both have been characterized by wanton fiscal policies. The former indulged in esoteric derivatives, liar loans, subprime dealings, enormous political lobbying power and outright fraud. The latter mis-allocated resources wantonly driven by government policy. And yet, the Chinese saw far greater incremental improvement in the quality of life over the past two decades, than the west.

Two sets of banking entities, one entirely private, and one primarily state owned, demonstrated different kinds of poor financial management. They also demonstrated that the argument of private vs state-owned is simply a debate regarding whether the dog is wagging its tail, or whether the tail is wagging the dog.

Therefore, dogmatic talk about bank independence means nothing in the real world. Only the end result that matter is that it generates economic growth and rising incomes.

[nandakumar]

Is that company called "Hindustan Teleprinters Ltd" that used to occupy some pretty decent real estate in Chennai still in existence. If yes, can someone tell me what in the year 2016 , with the iPads and smartphones and everything is that device called "teleprinter" used for ?

As a kid I remember seeing them in a musty corner in PSU banks, and was touted as a "Technological Marvel" , you type in one end and it automatically types on the other end thousands of kilometres away.

Vina
That piece of real estate was sold for 100 plus crores to the Vedanta Group. Some IT park has come up since then.

[nandakumar]

Is that company called "Hindustan Teleprinters Ltd" that used to occupy some pretty decent real estate in Chennai still in existence. If yes, can someone tell me what in the year 2016 , with the iPads and smartphones and everything is that device called "teleprinter" used for ?

As a kid I remember seeing them in a musty corner in PSU banks, and was touted as a "Technological Marvel" , you type in one end and it automatically types on the other end thousands of kilometres away.

Vina
That piece of real estate was sold for 100 plus crores to the Himachal Futuristic Group. They had some loans outstanding with SBI who took overthe land. They sold it to a real estate developer in Chennai. See this link.[
http://timesofindia.indiatimes.com/busi ... 410935.cms
/quote]

[Yagnasri]

Kingfisher house in Mumbai put to auction. Auction Notice published in ET and Toilet.

[Philip]

It's the sharks and predatory pol/babu/banker species who are the biggets defaulters,not the poor struggling homeowner and salaryman.Good to see that the King of P*ssers' property is being put to auction.However,the moolah stolen by the big sharks has fled our shores aeons ago and probably parked in some Caribbean haven.The global tanking is going to continue.Once again ironically,it may be India's black money that saves our goose.

http://www.telegraph.co.uk/finance/econ ... -live.html
Stocks in Japan tank and yen surges as world markets gripped by panic - live
Japan shares plunge almost 5 percent after £80bn wiped off FTSE 100 this week, as investors flock to safe-haven assets following Yellen's Congressional testimony
• Shares in Japan plummet almost 5 percent
• Market wrap: Investors fall prey to 'death spiral' as faith in central banks wavers
• Is the sovereign debt crisis coming back to haunt Europe?
• Bond yields plunge to record lows
• FTSE 100 slumps to three-and-a-half year low
• UK-listed banks hit seven-year low



http://www.theguardian.com/business/201 ... thers-pace
Japanese stock market plunges 5% as global rout gathers pace
Japan is set for its worst week since 2008 after the Nikkei fell 4.84% on fears about global banks, a rising yen and limitations of government intervention

[Singha]

http://swarajyamag.com/economy/sbi-boi- ... the-banks/

SBI, BoI Q3 Shockers: The Real UPA Scam Was In Messing Up The Banks

The next time Rahul Gandhi asks where are the achche din, the answer should be: they will come once we have fixed the damage you have done to the Indian banking system.


R Jagannathan
Jagannathan is Editorial Director, Swarajya. He tweets at @TheJaggi.

11 Feb, 2016

Quiz: Where did the UPA do the maximum damage? (a) 2G scam; (b) Coalgate; (c) CWG scam; (d) Banking sector scam(s).

You can choose any answer and you would not be wrong, but my pick would be (d) the banking sector near-scam, where cronies got crores of loans from nationalised banks for dubious projects which have now gone bad and are staining banks’ balance-sheets with red ink.

Economic revival is impossible without a robust banking sector, and that is precisely what is missing right now.

It is not that the rot is being discovered only now. Even while the UPA was in power, a lot of these bad loans were being quietly written off. According to this Indian Express report just two days ago, 29 public sector banks wrote off Rs 1,14,000 crore of bad loans in just three years, from 2013 to 2015. This was more than they did in the previous nine years.

Today’s crop of banking sector results shows that there is no end to the bad news. Close on the heels of horrid results from Punjab National Bank, Dena Bank, Central Bank and Allahabad Bank earlier this week, the last three of which saw a huge pileup of losses, the country’s biggest bank, State Bank of India, has reported shocking results. Net profits plummeted by 62 percent in the October-December 2015 quarter (Q3) compared to the year before, to Rs 1,115 crore.

But the really scary number is the level of gross bad loans – it went up by a steep Rs 15,957 crore to Rs 72,791 crore. The level of bad loans is more than 60 percent of the bank’s market valuation of around Rs 1,18,000 crore (as on 11 January). It shows how badly the market sees the performance of nationalised banks.

Nor is the market moping in vain. Another result (also announced today 11 January) was even worse. Bank of India, one of the top five public sector banks, plunged into a loss of Rs 1,510 crore in the third quarter. This loss figure – in just one quarter, mind you – is more than the entire valuation of United Bank of India (UBI). Put another way, Bank of India has lost enough in one quarter to buy one whole bank.

The point of giving you these numbers is simple: the real scams, whether 2G or in aviation or in coal, always have a counterpart in the banking system which has lent them money. While the banking system may not recognise them as a scam and merely as bad lending decisions, the linkage is undeniable. Behind every scam there is likely to be a bank (or banks) which has put its money on the line.

For example, Vijay Mallya’s Kingfisher owes more than Rs 7,000 crore to banks, including the State Bank of India. The airline’s failure has thus damaged banks more than Mallya.

The bad results in the third quarter of this year are due to the Reserve Bank’s insistence that banks should start recognising the real state of their balance-sheets by providing for stressed loans which look bad but have not been recognised.

But the worst is not over. Most banks may end up disclosing more bad loans in the fourth quarter, which will end this March. Then it will all hang out.

At last count (ie, before the current quarter), bad loans of banks were around Rs 4 lakh crore. But the end of the next quarter, it could be closer to Rs 5 lakh crore, depending on how much of their wounds banks reveal to the public.

The point is this: a lot of these loans would be crony loans, loans made to people favoured by the powers-that-be.

The Indian economic revival is being stymied by the fact that the necessary condition for revival – a healthy banking sector – is not yet in sight.

The next time Rahul Gandhi asks where are the achche din, the answer should be: they will come once we have fixed the damage you have done to the Indian banking system.

[Singha]

china also has a massive crony problem, hidden NPA and wasteful projects with low ROI but they do this on the back of a massive trade surplus with almost everyone, higher domestic savings rate, lower debt as a % of GDP and govt that is rich on the back corporate taxes.

so imo we are more up s**t creek with no paddle on this crony capitalist thing. all of these wasted/stolen funds with no recovery could have been allocated to more ROI projects like building the long delayed roads and railways that namo has kickstarted now.

[Austin]

'Deep Surgery', Not 'Band Aids', Needed to Clean Up Bad Loans: Raghuram Rajan

http://profit.ndtv.com/news/budget/arti ... ome-latest

[Yagnasri]

The real picture of banking is yet to come out. The immediate requirement is replacing of MDs and Chairmans of most of the banks and retire top level people en mass. Otherwise clear break from the past will not be there.

[Ramu]

Clean-up act on: RBI chief Rajan says will fix bad loans

IMO assets of the big defaulters should be confiscated to make at least partially recovery. One such big defaulter is Vijay Mallya.

Isn't he still a rajya sabha member?

[Yagnasri]

I think he is not anymore.

Rumour has it that he is trying to settle the account. If something near the principle amount it would be better to take it and close the matter.

[JTull]

India's Government-Led Light Bulb Program Draws Industry's Ire

The success of a program in India to outfit more homes with energy-efficient LED lighting has led to criticism that the market for the devices is being disrupted and undermined by the government’s role.

As of Feb. 10, India has distributed 60 million LED bulbs through a $1.2 billion initiative called the Domestic Efficient Lighting Programme, the brainchild of Prime Minister Narendra Modi. The result is some 1.8 gigawatts of electricity saved in the past year, according to data tracked by the government in real-time through its [urlhttp://www.delp.in/]website[/url].

In theory, replacing incandescent light bulbs with light-emitting diodes would help reduce greenhouse gas emissions. India joins other countries such as China and Japan in seeking a rapid shift to LEDs.

Savings aside, India’s program hasn’t escaped criticism, with some in the industry urging the government to get out of direct distribution. Even small retailers say they’re feeling the pinch, taking direct aim at the way the government’s program has forced prices lower.

“Who will buy from us if the government sells branded LED bulbs at such low prices?" said Sanjeev Verma, a bulb and lighting equipment retailer in east Delhi. “Our sales increased to 50 LED lamps a week in the middle of last year. Now they’re down to 20 a month.”

Government Tenders

At the heart of the criticism is the activist role India’s government has chosen to see that the LED program’s objectives are met.

Under the program, the government buys large volumes of LED lamps from private manufacturers through competitive tenders. Through the tenders, LED prices have fallen to 64.41 rupees, or 95 cents, a piece from 310 rupees last year. The saving is passed to consumers, who pay 130 rupees -- or lesser than half the market price -- to buy from state-owned power distribution companies.

By 2018, the program aims to save 20 gigawatts -- or enough electricity to meet Chile’s power demand -- by replacing incandescent bulbs with 770 million LED lamps. According to government estimates, the program will cut annual electricity bills by as much as 400 billion rupees ($5.9 billion).

Already, the wider adoption of LED lighting has saved India enough electricity in the past year to power the Himalayan state of Himachal Pradesh, according to government statistics.
But those in the private sector say there are limits to what the government’s program can achieve.

Broader Distribution

"For LED lamp penetration to grow even more rapidly, we will need to involve the broader ecosystem of retailers and distributors in enhancing the reach of the product," Harsh Chitale, the chief executive officer of Philips Lighting, South Asia, said in an email.

Noida-based Havells India Ltd., a manufacturer of electrical products that was expected to be one of the biggest beneficiaries of the government program, decided not to participate in the tenders because it didn’t consider the returns attractive enough.

"Companies can’t rely on these one-time bulk orders,” said Sunil Sikka, Havells India’s president. “If I have to give all my manufactured product to the government, then how will prices come down in the retail market?"

The government sees it differently.

"Single-source procurement has made us one of the cheapest in the world and helps us pass on cost advantages," Saurabh Kumar, managing director at Energy Efficiency Services Ltd., which is responsible for procuring and distributing the bulbs, said in a Dec. 30 interview.

Broader Targets

EESL is a newly formed state-run company.

If the industry were to sell LEDs at the same rate in the market as it does to EESL, there’d be no need for the government program in the first place, he said.

"Our objective is that the LED bulb should be available to the retail customer at a price equivalent or lower to the CFL lamp,” Kumar said. “I have never asked the industry to give me a particular price. We opened up competition."

EESL targets doubling LED distribution to 110 million lamps in the next two months.

[JTull]

India Sets Draft Norms for 5,000MW Grid-Connected Solar Projects

India seeks comments by Feb. 19 on draft guidelines for plan to set up 5,000MW grid-connected solar PV power projects with viability gap funding, ministry of renewable energy says in notification on website.

Ministry plans to set up 25 solar parks targeting to add 20,000MW solar power in next 5 yrs

Says issued norms will be basis for selection of solar projects

Aims to set up maximum capacity within the 50.5b rupee budget

To see the guidelines, click Link

[Dipanker]

Retail inflation hits 17-month high, industrial output falls again

NEW DELHI: India's retail inflation unexpectedly edged up to a 17-month high in January, while industrial production contracted at a faster-than-expected pace in December, underscoring imbalances lurking in Asia's third-largest economy.
Retail prices rose 5.69 per cent on year in January, their fastest pace since August 2014, government data showed on Friday. The rise compared with a 5.4 per cent increase predicted by analysts in a Reuters poll and a 5.61 per cent annual gain in December.

[disha]

India's Government-Led Light Bulb Program Draws Industry's Ire

My notes:

1. Which industry's ire? Oil Industry?

Shredding the article:

The success of a program in India to outfit more homes with energy-efficient LED lighting has led to criticism that the market for the devices is being disrupted and undermined by the government’s role.

As of Feb. 10, India has distributed 60 million LED bulbs through a $1.2 billion initiative called the Domestic Efficient Lighting Programme, the brainchild of Prime Minister Narendra Modi. The result is some 1.8 gigawatts of electricity saved in the past year, according to data tracked by the government in real-time through its [urlhttp://www.delp.in/]website[/url].

So is it not Government's role to conserve electricity? Particularly conserving electricity leads to lesser GHGs for which any government is mandated to do.

Savings aside, India’s program hasn’t escaped criticism, with some in the industry urging the government to get out of direct distribution. Even small retailers say they’re feeling the pinch, taking direct aim at the way the government’s program has forced prices lower.

At the heart of the criticism is the activist role India’s government has chosen to see that the LED program’s objectives are met.

Classic case of industry's profiteering has been impacted and they are using the small retailer strawman! So what is the government supposed to do? Not distribute LED, not buy it in bulk and with effective redistribution conserve electricity?

Already, the wider adoption of LED lighting has saved India enough electricity in the past year to power the Himalayan state of Himachal Pradesh, according to government statistics. But those in the private sector say there are limits to what the government’s program can achieve.

Like who in the private sector and which private sector and what are the limits!?

"For LED lamp penetration to grow even more rapidly, we will need to involve the broader ecosystem of retailers and distributors in enhancing the reach of the product," Harsh Chitale, the chief executive officer of Philips Lighting, South Asia, said in an email.

Noida-based Havells India Ltd., a manufacturer of electrical products that was expected to be one of the biggest beneficiaries of the government program, decided not to participate in the tenders because it didn’t consider the returns attractive enough.

"Companies can’t rely on these one-time bulk orders,” said Sunil Sikka, Havells India’s president. “If I have to give all my manufactured product to the government, then how will prices come down in the retail market?"

Point of one., but let us go with it.

1. For the bolded part., 'For Bread penetration to grow even more rapidly, we will need to involve the broader ecosystem of bakers and grocers in enhancing the reach of the product' - there said it. This is a generic statement that can be applied to everything from selling coal to rocket launches. Brilliant.

2. For the underlined part., what is 'attractive enough' return? And if the return is not attractive, you did not participate - the price had to go up !? But it came down!!

The last statement does not even compute. If you give all your manufactured product to the government, and then there still remains demand in the retail market, you can increase the manufacturing. In effect over a long term you are converting your manufacturing from simple incandescent bulb to LED bulbs. And with increase in supply - both in wholesale to GoI and in retail, you can bring down the prices in retail market!

The government sees it differently.

"Single-source procurement has made us one of the cheapest in the world and helps us pass on cost advantages," ... EESL is a newly formed state-run company.

If the industry were to sell LEDs at the same rate in the market as it does to EESL, there’d be no need for the government program in the first place, he said.

Exactly!

"Our objective is that the LED bulb should be available to the retail customer at a price equivalent or lower to the CFL lamp,” Kumar said. “I have never asked the industry to give me a particular price. We opened up competition."

That is the point., for better adaption of LED bulb, it has to come down to a lower price point making it attractive for people to go for a better technology. And with many manufacturers in fray, and with single-source procurement, the price has come down drastically. Basically the price has come down because the GoI has become a distributor. The manufacturing companies do not have to complain., if they were not doing price gouging in the first place!

[nawabs]

Squeezing the small saver

http://www.thehindubusinessline.com/opi ... yndication

[disha]

Squeezing the small saver

http://www.thehindubusinessline.com/opi ... yndication

^^ The article is half a dozen by one hand and only 6 numbers by other hand type. Cannot go into the details., but this two takes the cake:

One, there are the term deposits from banks where one can lock into prevailing interest rates for 1 to 10 years. But a 10-year term deposit with the country’s largest bank — SBI offers an interest rate of 7.25 per cent. This is a good 50 basis points lower than the 7.75 per cent available on its two and three-year deposits.

Of course., if you are going to park your money for an assured return for a longer term., the assured return is going to be lower for a longer term compared to a shorter term. The 'guarantee' decreases as the term gets longer and hence the return decreases. This is the norm since ages and will be the case in future too. Nothing alarming about it other than the usual shrill.

And here is another howler:

Two, there are the small savings schemes, but locking into a certain return for the long-term has become next-to-impossible with these schemes too.

For one, the basket of post office schemes that allow the investor to park 10 or 15 year money has shrunk dramatically in recent years. The sole small savings scheme that today accepts long-term money is the Public Provident Fund (15 year maturity). And the PPF doesn’t really shield savers from rate volatility, as the interest earned on its balances is subject to yearly resets (this will soon be quarterly).

With the discontinuation of the 10-year National Savings Certificates, savers have just one other option — the Sukanya Samriddhi Scheme (it can be held until the child is 18). However, this is open only to those fortunate enough to have a girl child.

If the interest rates are going down., then it makes sense to lock in a high interest rate now for a longer duration. What happens if the interest rates are going up? Then does it make sense to lock into a interest rate which will be assuredly low when the interest rate goes up?

The author bakes in an assumption that interest rate will always go down over a long term!!

The underlined part is a good thing IMHO! Okay if you want to save more, go for a girl baby! Go Girl!!

Other than the screaming headline, the Hindu businessline does not achieve much to educate its readers (other then seed in a gloom/doom scenario).

[hanumadu]

'Deep Surgery', Not 'Band Aids', Needed to Clean Up Bad Loans: Raghuram Rajan

http://profit.ndtv.com/news/budget/arti ... ome-latest

I still don't see how NPA's could be as much as 7000000 cr and if they are so much, how Rajan expects to clean up thebanks in one year? The government is saying they will infuse only 70000 cr over the next 4 years.

Most of the NPAs are in power and steel sector. How can investment in power sector be NPAs in a power deficit country like India. Assuming there have been cost over runs and the banks convert the debt to equity, the loans should be worth at least 50 paise to the rupee, unless the cost of running the power plants is more than keeping them idle which I am sure will not be the case.